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Government rejects AT&T Canada appeal

Industry Canada Minister Allan Rock announced late Wednesday that the Governor in Council has nixed AT&T Canada Inc.’s appeal to review its price cap ruling and is upholding the Canadian Radio-television and Telecommunications Commission’s (CRTC) decision.

In its ruling last May, the CRTC reduced the annual fee that telcos such as AT&T Canada and Sprint Canada would pay to the incumbent carriers for the use of their networks by 10 to 15 per cent. In its petition, the company said approximately 55 per cent of its annual costs were attributed to fees that it paid to incumbent carriers, like Bell Canada Inc., for access to their networks. AT&T Canada’s main objective in launching the petition was to foster competitively neutral access to those incumbents’ networks.

While its petition was denied, the telco has some reason to celebrate, even in the face of defeat.

“Naturally, we would have preferred that the government had granted an appeal but our goal when we launched [the appeal] back in 2002 was to focus the government and regulators’ attention on the imbalance that we have said is endemic in the current regulatory framework,” said Chris Peirce, senior vice-president, regulatory and government affairs for AT&T Canada in Ottawa.

It is a message that is being heard by the CRTC. After releasing a monitoring report last year which became a snapshot of the telecommunications industry, it “came to the conclusion that the degree of competition is not as high as we would like,” said Charles Dalfen, chairman at the CRTC in Gatineau, Que.

Dalfen said that the CRTC was “pleased” with the Cabinet’s decision to deny the appeal, but it recognizes that in order to attract foreign investment and continue to move forward in technology and services that the industry provides, competition will be critical.

“The funding of companies and investments in the sector is important and we’re hoping funding will be attracted to the ILECs (incumbent local exchange carrier) and the competitors so that they can both invest in facilities and so that Canadians can have robust competition. It’s moving in that direction,” Dalfen said.

With the price cap decision now final, the telco still has several other battles on its hands, specifically its debt issue under the Companies’ Creditors Act and a name change as the telco prepares to break ties with AT&T Corp. in the U.S. Peirce said the telco would emerge next week with no public debt, with revenues remaining largely flat from bankruptcy protection.

Still, Giga Research Director Brownlee Thomas in Montreal wasn’t particularly surprised with the appeal being squashed, saying “There’s only so far the CRTC can go in terms of re-interpreting the rules as stated.” Unlike in the U.S. where the Federal Communications Commission can define and implement policy, in Canada, the legislator is responsible for creating policy and the CRTC upholds the policy that is created, she explained. Still, if the company’s bottom line is being affected by the price of local access, it had an obligation to bring those costs down.

The statements made by the government, Thomas said, have done nothing to address competition or how to better regulate the industry. As for AT&T, she said enterprises should continue to see the telco as viable competition to enterprises, but the road ahead promises to be bumpy.

“It’s going to be tough, once [it] relieves [itself] of debt and has gone through bankruptcy and a name change, it will have a commercial wholesale relationship with AT&T Corp. and no longer have the ability to access its brand any longer,” she said.